Command Economy: Definition and Examples

A command economy, also known as a planned economy, is an economic system in which the government owns and controls all resources and means of production and makes all economic decisions. The government determines what goods and services are produced, how they are produced, and how they are distributed and priced.

Features of a Command Economy

Some of the key features of a command economy include:

- Centralized control: The government exercises complete control over the economy and makes all economic decisions.
- Collective ownership: All resources and means of production are owned by the government or by the people collectively.
- Allocation of resources: The government determines what goods and services are produced, how much is produced, and how they are distributed and priced.
- Lack of competition: Since the government controls all economic activity, there is no competition among producers or suppliers.
- Fixed prices: The government sets prices for goods and services, which may not reflect market demand or supply.

Examples of Command Economies

Some examples of countries with command economies include:

- North Korea: The government exercises complete control over all economic activity, and the people have no say in economic decisions.
- Cuba: The government owns and controls all resources and means of production, and the economy is highly centralized.
- China: While China has moved towards a market economy in recent years, the government still exercises significant control over the economy and makes many economic decisions.

Advantages and Disadvantages of a Command Economy

Advantages of a command economy include:

- Greater social equality: Since the government controls all economic activity, it can ensure a more equal distribution of resources and wealth.
- Efficient resource allocation: The government can allocate resources according to social priorities, such as health care, education, and public infrastructure.
- Stability: The government can ensure stability and predictability in the economy by controlling prices, wages, and production levels.

Disadvantages of a command economy include:

- Lack of innovation: Since there is no competition or market incentives, there may be little innovation or creativity in the economy.
- Slow economic growth: Command economies tend to be less efficient and productive than market economies, which can lead to slow economic growth.
- Reduced consumer choice: Since the government determines what goods and services are produced and how they are priced, there may be limited options for consumers.